28/06/2016 World Business Report


28/06/2016

Similar Content

Browse content similar to 28/06/2016. Check below for episodes and series from the same categories and more!

Transcript


LineFromTo

The British Prime Minister faces European leaders in Brussels today,

:00:00.:00:18.

as two more credit rating agencies downgrade their outlook

:00:19.:00:20.

And South Korea announces a massive $17 billion stimulus plan

:00:21.:00:28.

The government says Brexit is one of the reasons why.

:00:29.:00:40.

Welcome to World Business Report, I'm Sally Bundock.

:00:41.:00:43.

Also in the programme: VW is expected to announce

:00:44.:00:45.

a record-breaking settlement in the US, over its rigging

:00:46.:00:48.

A European Union summit gets under way in Brussels in a few hours'

:00:49.:00:59.

time, and the UK's decision to leave the EU is top of the agenda.

:01:00.:01:02.

It comes as Britain's economic standing has suffered a fresh blow.

:01:03.:01:05.

Two credit rating agencies downgrading its prospects.

:01:06.:01:07.

Fitch says fears about the impact of the referendum on Britain's

:01:08.:01:10.

public finances had prompted its decision.

:01:11.:01:11.

Standard Poor's has also stripped Britain of its last remaining

:01:12.:01:14.

Moritz Kraemer is chief ratings officer at Standard Poor's.

:01:15.:01:30.

The institutional set up and the governance standards of the UK are

:01:31.:01:38.

no longer of the shade that we believed before in terms of

:01:39.:01:43.

predictability, stability, and effectiveness of policy-making, as

:01:44.:01:48.

it is now much harder to actually foresee how would governments react

:01:49.:01:50.

to certain financial stresses that it has been before. So we really

:01:51.:01:55.

reassessed our view of the institutional capacity of the UK

:01:56.:01:59.

government to react to financial crisis, if and when they arise.

:02:00.:02:01.

Central bankers from around the world are also meeting

:02:02.:02:03.

They will discuss how to deal with market volatility

:02:04.:02:06.

In terms of the economy of the EU, economists are now trying to weigh

:02:07.:02:11.

up how it will be affected by the UK's decision to leave.

:02:12.:02:14.

Trade is one area that is vitally important.

:02:15.:02:16.

Last year the UK exported $294 billion worth of goods and services

:02:17.:02:19.

That is according to the UK's Office for National Statistics.

:02:20.:02:25.

Over the same period it imported more than $383 billion in goods

:02:26.:02:28.

That leaves a trade deficit of $89 billion, meaning

:02:29.:02:35.

there is an imbalance, with the EU exporting a lot more

:02:36.:02:38.

Germany could be one of the biggest losers if trade between the UK

:02:39.:02:47.

Britain is the country's third-biggest export market,

:02:48.:02:52.

Holger Schmieding is chief economist at Berenberg Bank,

:02:53.:02:59.

Nice to see you. So first of all, give us your take on the impact

:03:00.:03:15.

Brexit will have. We have mentioned Germany as a key market, sorry, the

:03:16.:03:22.

UK as a key market for Germany. Just talk us through some of the impact

:03:23.:03:27.

it will have. Yes, of course. Any disruption of trade with Britain

:03:28.:03:30.

will have an impact on the German economy. But Germany is exporting

:03:31.:03:35.

mostly good and it is highly unlikely that trade in goods such as

:03:36.:03:40.

trade in cars and machines will be significantly disrupted. So the

:03:41.:03:44.

impact on Germany will likely be low from that angle. What matters more

:03:45.:03:48.

at the moment is the uncertainty about the future of Britain, and

:03:49.:03:54.

uncertainty is simply bad for business, especially bad for

:03:55.:03:57.

businesses that sell investment goods, which Germany is a great

:03:58.:04:05.

exporter of that. So the uncertainty which the Brexit decision has

:04:06.:04:08.

created is a bigger impact than the immediate risk of trade. A lot of

:04:09.:04:14.

people are drawing conclusions about the impact on the UK economy, we

:04:15.:04:17.

have heard about credit agencies as well. What are people saying about

:04:18.:04:21.

the European economy, and the impact on, say, that side of the water, as

:04:22.:04:28.

it were. First of all, Britain exports are much bigger share of its

:04:29.:04:33.

GDP, 30%, to the EU, than vice-versa. That is, the mutual

:04:34.:04:38.

dependence between the very large area of the EU and the comparatively

:04:39.:04:42.

small area of written is that the impact of any disruption on the big

:04:43.:04:48.

area as much, much smaller -- Britain. So if the UK now goes into

:04:49.:04:52.

stagnation or recession, which is quite possible, what we would see on

:04:53.:04:56.

the continent including Germany is a comparatively modest dent to growth,

:04:57.:05:03.

and Germany may lose this year 0.2% of its GDP due to the uncertainty

:05:04.:05:09.

created by Brexit. Regrettable, but it is not really a big problem.

:05:10.:05:13.

Thank you very much indeed. Let's have a look at that meeting of

:05:14.:05:18.

central bankers and economists which will be taking place later.

:05:19.:05:20.

Among those attending is the former president

:05:21.:05:22.

of the European Central Bank Jean-Claude Trichet.

:05:23.:05:23.

He told our correspondent Theo Leggett what he made

:05:24.:05:26.

Well, first of all, of course I am very sad because I was hoping that

:05:27.:05:39.

you would remain with triumph, or at least win. And I think it is a

:05:40.:05:44.

sentiment of all Europeans, without any exception. So it makes the

:05:45.:05:50.

decision of the British people even more appalling, with the dice is

:05:51.:05:56.

rolling on the integrity of the countries, not only the long-term

:05:57.:06:00.

strategy of the future, it seems to be very hard to be bleak -- very

:06:01.:06:08.

hard to believe. How much does it matter for the rest of Europe? What

:06:09.:06:14.

are the risks? First of all it is an immense problem for the UK. It is a

:06:15.:06:17.

problem for us to the extent that the UK was a member of the European

:06:18.:06:22.

Union, and of course the GDP of the UK falls down, if we have a

:06:23.:06:26.

recession, it is a problem for us. To imagine that the UK living could

:06:27.:06:31.

create an existential problem for the EU or for the euro area, the UK

:06:32.:06:38.

does not belong in the euro area, seems to me to be a vast over

:06:39.:06:43.

exaggeration. What is the worst that could happen? I think that the main

:06:44.:06:48.

problem would be for the European populist, quote unquote, namely

:06:49.:06:55.

extreme left anti- European and extreme right anti- European, to

:06:56.:07:02.

call for themselves either dismantling the present institution

:07:03.:07:06.

of the European Union... I don't expect many of them to ask for

:07:07.:07:10.

leaving the European Union, but at least they would call for another

:07:11.:07:15.

one which would perhaps be more vocal. And I would say that in the

:07:16.:07:21.

euro area I see absolutely no country in the euro area asking to

:07:22.:07:25.

change something and to leave the euro area. They did not do that

:07:26.:07:34.

after Lehman Brothers and after the Greek and Portuguese problem, and we

:07:35.:07:44.

were 15 at the time of the collapse, and they stayed and four new

:07:45.:07:48.

countries entered that area after Lehman Brothers.

:07:49.:07:49.

South Korea is the first country to announce an economic

:07:50.:07:52.

South Korea will propose a supplementary Budget of around

:07:53.:07:55.

$8.49 billion to Parliament, as it shields itself

:07:56.:07:57.

from the potential fallout from Brexit and weak growth.

:07:58.:08:00.

Nice to see you, it has been a while. Interesting because the

:08:01.:08:18.

markets were boosted via this news, won't they, where you are? It is

:08:19.:08:23.

about calming down the markets, they are too volatile and too excited, so

:08:24.:08:27.

this is a huge amount indeed that the government hopes will cushion

:08:28.:08:30.

the impact from Brexit and the weak economic growth that you mention.

:08:31.:08:34.

And all the money from the supplementary Budget will be coming

:08:35.:08:37.

from surplus funds carried over from last year and the excess tax revenue

:08:38.:08:42.

expected from the first half of the year. And the forecast is that the

:08:43.:08:45.

stimulus package will boost GDP growth to about 0.2 to 0.3% in 2016.

:08:46.:08:51.

Other policies include nationwide discount sales, diesel owners

:08:52.:08:56.

getting incentives and consumers being -- consumers purchasing new

:08:57.:09:03.

appliances, getting incentives. It is not just to calm financial

:09:04.:09:10.

markets. The Chinese Premier Li Keqiang has warned he will not allow

:09:11.:09:15.

rollercoaster ride in his markets. Li Keqiang, who is at the economic

:09:16.:09:20.

Forum in Tianjin, says the government will sustain risks when

:09:21.:09:26.

balancing its markets. The likes of India have come out with statements

:09:27.:09:29.

saying they will do whatever they can to calm down these markets thank

:09:30.:09:34.

you so much, very interesting. We will look at the numbers in just a

:09:35.:09:39.

moment. Let me just tell you about VW, which agreed to pay $15 million

:09:40.:09:45.

in settlement claim stemming from its diesel emissions scandal. It

:09:46.:09:48.

will be the largest consumer class-action settlement ever in the

:09:49.:09:51.

United States, but it still requires a judge's approval before it can go

:09:52.:09:56.

into effect. The proposal involves the Federal Government and lawyers

:09:57.:10:01.

representing the owners of around 475,000 VW vehicles, and they will

:10:02.:10:06.

be compensated, the vehicle owners, as well. Let's show you financial

:10:07.:10:09.

markets. Another story that has happened in Japan today:

:10:10.:10:14.

Takata chief executive Shigehisa Takada has said

:10:15.:10:16.

he would resign once a new regime is found for the car parts supplier,

:10:17.:10:20.

finally bowing to calls to step down over a long-running recall crisis.

:10:21.:10:23.

Takata is seeking a financial backer to help it bear to costs

:10:24.:10:26.

of a massive global recall of potentially deadly airbags.

:10:27.:10:28.

you can see Japan up quite strongly. A mixed day for markets in Asia but

:10:29.:10:32.

Japan and other markets given a boost by that news from South Korea.

:10:33.:10:35.

That is how things ended on Wall Street. Look at the NASDAQ, the tech

:10:36.:10:43.

heavy weighted index down, and the Euro trading day. -- trading

:10:44.:10:44.

Download Subtitles

SRT

ASS